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Finding NEMO - two central I-SEM characters swim into view

In line with its obligations under EU law, the Commission for Energy Regulation recently designated EirGrid plc as Nominated Electricity Market Operator for Ireland, in tandem with the Utility Regulator’s designation of SONI Limited as Nominated Electricity Market Operator for Northern Ireland.

We take a look at these decisions in the context of the development of the all-island Integrated Single Electricity Market that is currently ongoing in Ireland and Northern Ireland.

European Integration

Observers of the Irish electricity sector will be aware that the energy regulators of Ireland and Northern Ireland have, since 2013, been engaged in a major redesign of the all-island wholesale electricity market. The project is known as the “Integrated Single Electricity Market”, or I-SEM. Its high level design was published in September 2014, and detailed design work is still ongoing.

The need for the I-SEM project has arisen because the existing wholesale market does not satisfy the requirements of the European Commission’s Third Energy Package. The Regulation on Capacity Allocation and Congestion Management (“CACM”), which was adopted in July 2015, imposes particular rules for “cross-zonal capacity allocation and congestion management in the day-ahead and intraday markets”, which the I-SEM will facilitate for Ireland and Northern Ireland.

The CACM regulation includes a dispensation that allows Ireland and Northern Ireland additional time (up to 31 December 2017) to implement I-SEM. However, this dispensation does not exclude Ireland and Northern Ireland from a number of other tasks that are required to be carried out in advance of that date.

Gone Fishing

These tasks include the requirement that each Member State designates at least one Nominated Electricity Market Operator (NEMO) by 14 December 2015, for the performance of certain tasks related to day-ahead and intraday market coupling.

The Commission for Energy Regulation is the body responsible for designating NEMOs in Ireland, with the Utility Regulator exercising this role for Northern Ireland. As part of the designation process, each regulator was required to analyse ten designation criteria, as outlined in the CACM regulation, including requirements that an applicant has adequate resources and can treat all market participants in a non-discriminatory way.

Designation as a NEMO is for an initial term of 4 years, but it may be revoked if a NEMO such fails to maintain compliance with these criteria.

If it Ain’t Broken…

According to the regulators’ respective decision papers, the only applicant for NEMO designation in Ireland was EirGrid plc ("EirGrid"), the operator of the Irish electricity transmission system, and the only applicant for NEMO designation in Northern Ireland was SONI Limited (SONI), the operator of the Northern Irish electricity transmission.

In applying the designation criteria, the regulators were therefore not choosing NEMOs from amongst a pool of applicants – instead, each regulator was assessing whether its single applicant did or did not meet the designation criteria.

Through a contractual joint venture, EirGrid and SONI already act as the operator of the current all island electricity market. The track record of this market operation activity undoubtedly helped the regulators to conclude that EirGrid and SONI were suitable NEMO candidates.

Comments

The designations of EirGrid and SONI, as NEMOs for Ireland and Northern Ireland respectively, are significant steps in the development of the I-SEM, as these are the first major assignments of responsibilities in relation to the operation of the redesigned market. The designations are also likely to provide additional impetus to the involvement of EirGrid and SONI in the detailed design of the I-SEM.

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